Cyprusâ€™ recent tax law amendments has made the island even more attractive destination for someone to relocate to. Cyprusâ€™ location, European Union Membership, culture, network of double tax treaties and advanced infrastructure were already known, but with the recent tax amendments it is possible to relocate to Cyprus and minimise if not nullify tax on your income.

This coupled with the low corporate tax rate of 12.5% for Cyprus tax resident companies, makes Cyprus an ideal place to move.

Following our previous newsletter on the matter the Cyprus Parliament has enacted the below mention tax reforms into law and were subsequently published in the Government gazette on Thursday 16th July 2015.

In view of the new de-offshorisation regulations of Russia and the new tax amendments of the Cyprus Tax Laws new opportunities can arise for the effective use of Tax structures with Cyprus companies. Even though Russia is used as an example the below structures apply to other jurisdictions as well. Further to the classic back to back schemes of financing and Intellectual property rights we describe below the examples of the new structures that can be used for financing and Intellectual property rights or the so called boxed IP rights scheme.

YACHT SCHEME FOR CYPRUS COMPANIES WITH SIGNIFICANTLY REDUCED VAT UP TO 80%

As per the previous VAT regulations in Cyprus yacht purchase and yacht leasing was subject to full rate of VAT at 19%. A lot of questions were raised justifiably when the yacht was not actually used within Cyprus and EU territorial waters. In this case certain part of the VAT should not have been payable. So all sorts of complications and disputes would arise as to the usage or not of a yacht within EU territorial waters.

In order to simplify procedures and avoid bureaucratic complications the Cyprus VAT department has issued a Circular on the 13 March 2012 as well as an update version on 30 January 2014(encompassing the new VAT regulations) establishing the procedures and policy concerning yacht leasing which can include yacht purchasing as well.

More specifically it has issued two tables (one for motor yachts and the other for sailing yachts) whereby depending on the length of the yacht a percentage of use within the EU territorial waters is specified.

Table A: Motor yachts

Table B: Sailing Yachts

ALL the following conditions MUST also apply

The financial leasing agreement shall be between a Cyprus company and any person or company irrespective of origin.

From 1st January 2013 the place of supply of pleasure yachts (except short term leases) is the country where the yacht is made available to the recipient-lessee. The yacht mustcome to Cyprus, within a month from the commencement of the leasing agreement. Any postponement in relation to the above can only be granted by the VAT Commissioner. The postponement cannot be longer than the lease period whereby the right of purchase can be exercised

An initial contribution shall be paid by the lessee to the lessor amounting to 40% (forty) of the value of the yacht.

The Lease instalments shall be payable every month and the lease agreement shall not be less that 3 months (90 days) â€“new provison as per amendement- and cannot exceed 48 (forty eight) months.

The lessor shall be expected to make a profit which cannot be less than 8% (10% before amendment) of the value of the boat. At the beginning of the lease agreement the total lease payments where the VAT is calculated is increased by half of that profit i.e. 4% (5% before amendment).

The final payment at the end of the lease agreement, whereby the yacht is effectively transferred in the ownership of the lessee, cannot be less than 4% (5% before amendment) of the yachts value, and represents part of the profit of the agreement. The last payment is subject to full VAT rate applicable on the date of payment which is currently 19% VAT.

Prior approval shall be sought in writing from the Commissioner of VAT who is to confirm the rate applicable according to the use in EU territorial waters (depending on the size of the yacht), as well as the acceptability of the value of the yacht as declared. For this purpose a valuation certificate of the yacht shall be submitted with the leasing agreement and application for approval.

If the lessee opts to purchase the yacht at the end of the lease, a VAT paid certificate will be issued to the lessee provided that all VAT due has been paid.

Working example

Facts: New yacht over 24metres long with value â‚¬5,800,000. In normal circumstances the VAT on the yacht would have been 19% i.e. â‚¬1,102,000 euro. With the leasing scheme VAT payable will be â‚¬ 282,108 euro with the saving amounting to â‚¬ 819,892. As per the scheme:

Cyprus Company buys the yacht from a UK supplier. Because the Cyprus company it is registered for VAT in Cyprus it will not be charged for VAT on purchase.

Upon purchase it may be leased to a person or a company. It can be for instance another Cyprus company. 40% of the value of the boat is payable as first lease payment. The yacht is subject to 20% reduced EU territorial waters reduced rate for VAT.

The lease agreement will be for 12 months and will leave a profit of 10% for the Cyprus Company.

Total VAT on the scheme â‚¬282,108

Corporate taxation of profit of â‚¬464,000 is 12.50% after deduction of business related expenses and financing costs.

Please contact a member of our staff for further information and/or clarifications.

Please contact a member of our staff for further information and/or clarifications.

A Cyprus Investment Firm (CIF) is one of the most useful tools in the European Union (and Internationally) if you intend to provide and perform investment services and activities either within Cyprus or abroad on a professional basis on certain financial instruments.

The investment services include the following:

Reception and transmission of orders in relation to one or more financial instruments

New Limitation of Actions Law - July 2012

Limitation of Action

It is common amongst common law jurisdictions to have laws that prescribe the maximum time after an event that legal proceedings based on that event may be instigated. This is called a statute of limitation of actions.

In Cyprus, the limitation of actions is governed by the Limitation of Actions Law, Chapter 15 of the Laws of Cyprus (the "Cap.15"). However, Cap.15 has been effectively suspended due to the political events of the 1960s and the effects of the 1974 Turkish invasion (the "Suspension Laws"). A series of amendments repeals and extensions to the Suspension Laws muddled the waters and created uncertainty. On May 31, 2012, the House of Representatives enacted the Limitation of Actionable Rights Law of 2012, L.66(I)/2012 (the "Amendments") modernising the law in relation to the limitation of actions. Subject to what is stated in paragraph (VI) below, the Amendments are effective as of July 01, 2012 and, among other, abolish Cap.15.

The Bank of Cyprus (BoC), the largest lender on the Island , has announced the appointment of the new CEO, John P. Hourican. This is yet another vital step in the final restructuring, after the recapitalizing of the Bank, bringing stability to the Bank and indeed to the financial sector in Cyprus !

Cyprus will compensate Russian bank depositors who suffered haircuts to their deposits, as a result of the recent measures taken in order to comply with the terms of the Island's â‚¬10 billion bailout, said President Anastasiades.

Finally, after a long and tense meeting on Tuesday, the 10th of September, a new board of directors was elected for the Bank of Cyprus. The shareholders meeting in which depositors and steak holders were represented, voted in a new board reflecting the composition of the Bank's clients as well as a representation of the former Laiki Bank depositors ("Legacy Laiki").

South Africa has excellent and long standing bilateral relations with Cyprus . These strong ties are further cemented with the help of the large and influential Cypriot (and Greek) community in South Africa , numbering about 60,000. The Cypriot Community also serves as a link between the two countries, both politically and economically.

Cyprus approved licenses for exploratory drilling to exploit offshore oil and gas deposits in four blocks off its shore. Drilling permits were approved for blocks 2,3,9 and 11. Those interested in searching for hydrocarbons within Cyprusâ€™ exclusive economic zone are Russia, France, Italy and South Korea.

As per the previous VAT regulations in Cyprus yacht purchase and yacht leasing was subject to full rate of VAT at 17%. A lot of questions were raised justifiably when the yacht was not actually used within Cyprus and EU territorial waters.

The Republic of Cyprus issued an invitation to all interested persons to apply for hydrocarbon exploration licenses and subsequent hydrocarbon exploitation licenses in respect of certain acreage in the Exclusive Economic Zone of Cyprus.